Opportunities and Threats of Foreign Direct Investment

A paper published by David Woodward for G-24 clearly states that FDI flows to developing countries have grown strongly in recent years. It has mentioned that total flows in 2006 were nearly double their 2001 level, and are estimated to have increased by a further 20% in 2007. The paper stated that flows to West Asia have increased by 700%, those to Latin America remain marginally above the 2001 level. Extractive sectors predominate in Sub-Saharan Africa (SSA), and services in West Asia, while knowledge-intensive sectors have become more important in East Asia.

However it's true that FDI do offer various opportunities and helps a country to prosper by means of providing job opportunities, infrastructure development and certain other benefits, but in long-term balance-of-payments effects if outflows for profit remittances and imports prevail over the initial capital inflow and additional export revenues. The dependence of especially developing countries increases so much on FDI that they are busy in formulating new policies to attract investment, but one should not forget that there are countries who have planed their policies in a way that once they were biggest importers of the same products which now a days they are biggest sellers/ exporters.

The views mentioned are personal.